Discourage Waste, Not Work

The only truly good tax, of course, as I wrote in Time a dozen years ago, is a tax on someone else. Failing that, though, the best taxes are simple, fair and easy to collect, and – perhaps most important – they discourage the right things. (When you tax something, you discourage it.) Take the existing federal gasoline tax. Anyone can understand it (a flat 18.4 cents a gallon); it’s easy to collect and reasonably fair (the more you use the roads, the more you pay for them); and it discourages things we want to discourage: our dependence on foreign oil, the trade deficit, pollution, and traffic. As taxes go, this one’s a winner.

Actually, it should be a lot higher – not immediately, and not all at once, but phased in over 12 years, say, after perhaps three years’ warning, a dime a year. And, by law, every penny of that tax revenue should be used to LOWER the tax on the things we want to ENcourage: working and saving. So you’d take every penny of the gas tax and use it to lower the bottom income tax bracket (that applies at all taxpayers) and to increase the earned-income tax credit (that applies to people who drive to work but don’t earn enough to pay income taxes). People would have a lot of time to begin factoring fuel efficiency into their automobile purchasing decisions – or not, if they chose not to, which they should be free to do – and manufacturers, anticipating the likely higher demand for fuel efficiency, would have time to accelerate their efforts to build more fuel-efficient cars. (Toyota and Honda already have cars that get 48 and 60 miles to the gallon.)

The net result would be that we as a nation of workers and drivers pay not one red cent more in taxes than now. But that we get rewarded with more after-tax money from our work and our investments; and have an incentive to buy and burn less gasoline, to make us richer, safer and healthier as a nation.

This will never happen. The oil companies would never allow it, and politicians have long since learned that otherwise bright, rational people become completely hysterical at the mention of any such thing. When, not many years ago, the federal gas tax was hiked from 14.1 cents to 18.4 cents a gallon – an annual tax hike of twenty-five dollars a year for the average driver – the Nightly News showed suburban women virtually in tears, protesting that it would drive their families to starvation.

So you can rest easy that we will never get sensible energy policy or sensible gasoline tax policy. Which is just the way the Saudis and the Iraqis – and the oil companies, naturally -like it.

Tomorrow: Lowering the Capital Gains Rate To ZERO (Really)